How to Get a Car Loan With No Credit


Would you believe that having no credit is better than having bad credit? With bad credit, you have a track record of making delayed payments — or not at all. Many lenders and landlords thus prefer dealing with someone with a clean slate.

This means if you have no credit yet, you’re still in a better position when you’re applying for loans and such.

However, that doesn’t erase the fact that it’s still much harder to pursue a loan. The risks for the lender are still there. After all, how do they know you’ll pay when you have no history of payments at all?

With that said, can you still apply for a car loan? Sure, you can. Follow our tips below on how to get a car loan with no credit.

1. Establish a Credit History

If you want to know how to get a car loan with no credit, it may pay to know how to establish credit first. If you build good credit, this will help you secure car loans with better terms.

An easy way to do this is to open a bank account. If you remain in good standing for a long time, it will show lenders you’re good at managing money.

You may also take out short-term loans you can pay off in a month or two. This way, you’ll have something to show when they look for payment history.

You can also get a secured credit card and use it for your purchases. Department store cards or gas station cards will work, too.

You only need one to pay for your purchases instead of cash. Use it for your groceries, gas, and other stuff you’re planning to buy. The trick is to only buy what you can afford with cash.

You have to pay the balance in full every month for you to have good credit standing. Otherwise, you’ll be in a worse position than you started with.

2. Save Up for a Down Payment

A down payment acts as show money, which is proof of your capacity to pay. While it won’t pass as the only thing needed to pass an application, it will still help boost your chances.

Another advantage of this is that you’ll have a lower interest rate because your remaining balance is lower. Thus, saving money for a down payment will help you save more money in the long run.

Try to save at least 10% to 20% of the car’s cost to have better chances. The more you save, the less you pay.

3. Look for Lenders Who Don’t Look at Credit History

If you don’t have the time to build your credit or save money, look for lenders who don’t care about it. Some lenders only look at your financial capacity and your ID to assess your application.

Some may have additional requirements, like collateral.

Prepare yourself for the possible high-interest rates, though. Financial institutions take into account the risk they’re taking when calculating the fees. As someone with no credit, you’re considered a high-risk borrower. This then increases the interest rates.

If you need a car loan without credit at once, however, this is a better solution than most. First Financial, among others, provide car loans to individuals with no or poor credit. Aside from that, read these reasons why they’re a good choice for no credit car loans.

4. Try Banks, Car Dealerships, and Credit Unions

If you open a bank account, you may be able to ask that bank for options regarding a car loan. It may surprise you that you can qualify for a car loan in such an institution.

If that goes nowhere, try car dealerships next. Most likely, they’ll make an effort to help you get a loan because this means money for them.

If that still doesn’t work, try credit unions, too. For this option, you’ll have to sign up as a member to qualify. Look for credit unions in your area and ask their requirements for memberships and car loans.

5. Get a Cosigner

If banks and lenders can’t trust you, get someone they can trust to trust you. Get a cosigner with good credit to vouch for you in the application process.

They’ll have to sign a contract stating they’ll shoulder the responsibility of paying for the loan should you become unable to. As such, you have to find someone willing to bear that risk.

This is only possible if you can get someone to trust you to make payments. The risk here for you is that if you stop paying, it may hurt your relationship with the cosigner.

Furthermore, failure to pay your loan will still reflect on your credit. To save your credit and relationship, remember to pay in full and on-time monthly.

6. Have a Collateral

If you have something you can put up as collateral, considering using that.

However, it’s unlikely for someone with a blank slate to have something to show as collateral. So lenders with this requirement may not be an option. If you have something of value in your name, though, it will help your chances of getting a car loan.

This will also encourage you to be diligent to prevent losing your collateral.

7. Prepare Your Documents

Because you don’t have a credit history, you’ll have to show your financial capacity using documents. Gather what you can, including pay stubs, employment history, bank statement, and any bills such as phone and utility bills.

Your employment history shows you have a source of income. If you stay with your employers for a long time, you have better chances of approval. That’s because it means you’ll likely still have a job in the future.

Your bank statements and pay stubs show whether you can afford the monthly payments. Bills can show that you pay on time but only if you do pay on time.

Learn How to Get a Car Loan With No Credit

After knowing how to get a car loan with no credit, you should then learn how to manage your approved car loan. Remember to make payments on time.

This will be the first major loan that will help you build your credit history. This means it dictates the types of loans you can qualify for later on.

Read our other articles for more tips to set you on the right path to financial security.

Jeff Campbell

Jeff Campbell is a husband, father, martial artist, budget-master, Disney-addict, musician, and recovering foodie having spent over 2 decades as a leader for Whole Foods Market. Click to learn more about me

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